Gas line: Highway not the only way

Lawmaker seeks involvement in Knowles' talks with industry

Posted: Thursday, February 01, 2001

By BILL McALLISTERTHE JUNEAU EMPIRE

For anyone seeking clarity on the issue of a natural gas pipeline, the Capitol is the wrong place to be this week.

A key legislator said he wants lawmakers to be part of negotiations between Gov. Tony Knowles and pipeline developers on any deferred taxes and royalties that might be offered to reduce upfront costs for the project.

Then Knowles played down his earlier comment that such deferrals or incentives probably would be needed to assist the pipeline project, which he had described as economically "marginal" Jan. 8.

North Slope producers maintained their silence on gas issues that are before lawmakers.

And a liquefied natural gas project aimed mostly at Asian markets made a comeback after being widely written off as less attractive than a project targeting the Lower 48. An LNG proponent insisted to the Democratic caucus Tuesday and to the House Special Committee on Oil and Gas today that all proposals other than his pipeline to Valdez range from inconceivable to unlikely.

The committee is holding hearings on Chairman Scott Ogan's bill to force developers to choose a pipeline route that follows the oil pipeline south from the North Slope to the Alaska Highway, where it would track the highway east into Canada and connect with the existing North American grid. The committee also heard a bill clarifying that the governor could consider a contract in lieu of taxes and royalties for a developer pursuing something other than an LNG project.

As of late this morning, there have been no witnesses testifying on behalf of North Slope producers. A spokesman for BP Amoco said recently the company has no comment on attempts to dictate the pipeline route.

"It's been quiet," acknowledged Ogan, a Palmer Republican, adding that there will be several more hearings before the committee takes action.

Ogan wants to review any deal Knowles might make with pipeline developers, before it's signed.

Under law, the governor could negotiate a package and present it to the Legislature for an up-or-down vote. It would be politically difficult for the Legislature to vote no and delay the pipeline, even if the deal wasn't in the best interests of the state, Ogan contends.

He said in an interview that he's thinking of something equivalent to the governor's line-item veto authority in reverse.

Knowles told reporters he doesn't need legislative approval to talk to industry. And he said it's not certain that a deal will be necessary.

"We can negotiate anything," he said. "It has to come back to the Legislature."

And although Knowles has repeatedly said "my way is the highway," he didn't endorse - or oppose - Ogan's bill to rule out other pipeline routes.

"Legislation doesn't create a project," Knowles said. "The market is what's going to make that project happen."

Jeff Lowenfels, president and CEO of Anchorage-based Yukon Pacific Corp., shook up the issue by insisting there are only two projects that have cleared enough regulatory hurdles to be feasible. Those are the Alaska Highway route, authorized by Congress and selected by President Jimmy Carter in the 1970s, and Yukon Pacific's proposal to build a pipeline to Valdez, chill the gas into liquid and ship it to South Korea, Japan and Taiwan.

Lowenfels, a former assistant attorney general for Alaska, said existing U.S. and Canadian laws, executive decisions and treaties rule out the so-called northern pipeline route off-shore to the Mackenzie Delta in the Northwest Territories, a project which also has no permits and faces a daunting environmental review.

And contrary to conventional wisdom, the Alaska Highway project is doubtful because there are new gas discoveries closer to the Lower 48 market, such as in Nova Scotia, Lowenfels said. Also, the highway pipeline, if built to the size producers say they need, would carry so much gas that it would block commercialization of new Canadian gas for 14 years, something Canadians obviously wouldn't allow, he said. "I do not believe there will ever be a pipeline that serves the North American market."